IAG has confirmed that it does not have net insurance exposure to trade credit policies, including those sold through BCC Trade Credit Pty Ltd (BCC).
BCC is an underwriting agency authorised to underwrite trade credit insurance on IAG's behalf through Insurance Australia Limited (IAL), one of the insurer's two licensed insurance subsidiaries in Australia.
IAG explained that it sold its 50% interest in BCC on April 09, 2019 to Tokio Marine Management (Australasia) Pty Ltd, eliminating net exposure to trade credit insurance. IAL has been underwriting new policies from the date of sale up to June 30, 2019, and Tokio Marine & Nichido Fire Insurance Co. Ltd retained the risk for these policies, net of reinsurance.
As part of the agreement, IAG permitted Tokio Marine to hold any remaining exposure to trade credit insurance written by BCC through IAL.
The announcement follows an investigation by the European Central Bank (ECB) to determine which lenders were exposed to Greensill Capital (Greensill) and its key client GFG Alliance.
Greensill, which lends businesses money to pay their suppliers in return for a fee, secured funding by passing on the load to investors through funds such as those of Credit Suisse. It is now preparing to file for insolvency after Credit Suisse abandoned €10 billion of supply chain finance funds linked to the group, reports The Australian Financial Review.
In Greensill's court battle, court filings showed that Greensill was trying to restore around US$4.6 billion of credit insurance as the loss of coverage could trigger a wave of insolvencies, according to The Guardian.
